Omnibus Funding Package with COVID-19 Relief, Health Care Extenders, and Surprise Billing Ban
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Omnibus Funding Package with COVID-19 Relief, Health Care
Extenders, and Surprise Billing Ban
Authored by Manatt Health
January 2021
The Consolidated Appropriations Act Overview
After a dynamic few weeks of negotiations, President Trump signed into law on December 27,
2020 a nearly 6,000-page legislative package (The Consolidated Appropriations Act, 2021) that
includes government appropriations through September 30, 2021; COVID-19 relief funding and
targeted policy changes, a subset of which impact health programs; extensions of expiring health
programs; a ban on surprise billing; and an amalgam of odds-and-ends health policy provisions.
FY 2021 Appropriations. The bill contains $656.5 billion in non-defense discretionary funding,
including $97 billion for the Department of Health and Human Services (HHS)—$2.1 billion
above the 2020 enacted level.1
COVID-19 Stimulus Package. The $900 billion in COVID-19 stimulus provisions include a handful
of key health care priorities, including state and locality funding for COVID-19 vaccine
distribution and testing and some policy changes to the Provider Relief Fund. The bill also
includes major non-health care provisions, such as Paycheck Protection Program funding and
policy changes, stimulus checks, and federal unemployment insurance. However, the COVID-19
stimulus agreement is as notable for what is not included as for what is included. For example,
states and stakeholders have been lobbying Congress to replenish the state and locality
Coronavirus Relief Fund and to increase the Medicaid enhanced matching rate that applies for
the duration of the public health emergency (PHE) and to extend it beyond the PHE. Those
provisions to help states weather the economic downturn were not included. In light of these
and other health care stakeholder concerns, Democrats—and the incoming Biden-Harris
Administration—are likely to revisit COVID-19 stimulus legislation post-inauguration. With
Democrats now in control of the presidency and both chambers of Congress, support for
another large legislative package may be possible.
1 For more information about HHS appropriations, see page 27 (Division H) of the House Appropriations Committee summary.Other Health Care Provisions. The bill also contains several important health care provisions
that—until the past few weeks—were not part of the plan for the year-end package. But in mid-
December, committees announced they had reached a bicameral, bipartisan agreement to ban
surprise billing, resolving a policy issue that had occupied significant time over the past couple of
years and providing significant offsets to fund other provisions in the year-end bill. The surprise
billing agreement paved the way for Congress to extend expiring health care programs for
multiple years and to address odds-and-ends member and committee priorities. For example,
the bill addresses long-standing concerns about cost-sharing for colonoscopies in Medicare.
However, Congress did not extend Medicaid coverage for postpartum women eligible for
Medicaid on the basis of their pregnancy (from 60 days to 12 months), despite recent
speculation that leaders were close to reaching a deal that included this policy.
Ban on Surprise Billing. The bill also includes a ban on surprise billing that creates an
independent dispute resolution process for determining payment for claims that would
otherwise result in surprise bills.
This analysis includes a summary of the following health care provisions:
• COVID-19 relief provisions, including federal and state government funding for vaccines and
testing; an extension of the deadline by which state, local, and tribal governments must incur
Coronavirus Relief Fund expenses; and additional funding and Provider Relief Fund policy
changes.
• Medicaid health care extenders, which in many cases ensure the continuation of otherwise-
expiring health care programs for multiple years.
• Delay in Medicaid Disproportionate Share Hospital (DSH) allotment reductions and
supplemental payment reporting requirements and other Medicaid supplemental payment
provisions that could impact the amount of supplemental payments individual providers
receive.
• Other Medicaid provisions, including codifying in statute non-emergency medical
transportation requirements.
COVID-19 Relief
In addition to fiscal year (FY) 2021 HHS appropriations, 2 Division M of the bill includes
supplemental funding for HHS departments to respond to COVID-19; much of the supplemental
funding must be distributed to designated recipients such as states, localities, and tribes/tribal
organizations. It also extends the deadline by which states must incur Coronavirus Relief Fund
expenses, and modifies some components of HHS guidance regarding use of Provider Relief
Fund dollars.
2 See Division H.
2Vaccines and Other Countermeasures. The bill allocates various amounts as follows:
• $22.95 billion to the HHS Public Health and Social Services Emergency Fund, for the purchase
of vaccines, therapeutics, diagnostics, necessary medical supplies, and medical surge
capacity. HHS must:
o Make $19.7 billion available to the Biomedical Advanced Research and Development
Authority (BARDA).
o Allocate no more than $3.25 billion to the Strategic National Stockpile.
• $8.75 billion to the Centers for Disease Control and Prevention (CDC) to plan, prepare for,
promote, distribute, administer, monitor, and track coronavirus vaccines “to ensure broad-
based distribution, access, and vaccine coverage” through September 30, 2024.3 Of the
$8.75 billion, CDC must distribute at least $4.5 billion to states, localities, territories, and
tribes. With respect to this $4.5 billion, the bill also specifies that the CDC must:
o Distribute funding according to the formula that applied to the Public Health
Emergency Preparedness (PHEP) cooperative agreement in FY 2020. (This is the same
formula that Congress required HHS to use to distribute a portion of testing funding
in prior stimulus bills.)4
o Make at least $1 billion available within 21 days of the bill’s enactment.
o Allocate at least $300 million for high-risk and underserved populations, including
racial and ethnic minority populations and rural communities.
• $55 million to the Food and Drug Administration (FDA), of which $30.5 million is earmarked
for advanced manufacturing of medical products and $9 million is for the development of
medical countermeasures and vaccines.
Testing and Tracing. The bill adds $22.4 billion to the HHS Public Health and Social Services
Emergency Fund for COVID-19 testing and contact tracing 5—all of which must be distributed to
states, localities, territories, and tribes within 21 days of the bill’s enactment. Of the $22.4
billion:
• At least $2.5 billion must be used for high-risk and underserved populations, including racial
and ethnic minority populations and rural communities.
• $790 million must be distributed by the Indian Health Service, at its discretion, to its directly
operated programs and to tribes and tribal organizations.
3 The bill enumerates a wide range of eligible uses of the funding, including construction, alteration, and renovation of non-
federally owned facilities to improve preparedness and response capabilities at the state and local levels.
4 HHS has elected to distribute state, locality, and territory testing funds authorized by previous COVID-19 bills via the CDC
Epidemiology and Laboratory Capacity for Prevention and Control of Emerging Infectious Diseases (ELC) cooperative
agreement; the bill allows HHS to continue using this mechanism or an alternate mechanism of its choosing.
5 The bill enumerates a wide range of eligible uses of funding, including tests for active infection and prior exposure; molecular,
antigen, and serological tests; manufacture, procurement, and distribution of tests; testing equipment and supplies; personal
protective equipment (PPE) needed to administer tests; and surveillance, containment, and mitigation, among other uses.
3The bill requires recipients of the funds (governors or other designees of each jurisdiction) to
update their testing and contact tracing plans no later than 60 days following their funding
award, and every quarter thereafter until funds are expended. (States submitted their individual
testing plans for the duration of 2020 in July.) In turn, within 15 days of receipt of testing plans
from fund recipients, HHS must provide to selected congressional committees and make public a
summary report of the plans.
Behavioral Health Programs. The bill provides $4.25 billion to the Substance Abuse and Mental
Health Services Administration (SAMHSA), including $1.65 billion each for the Substance Abuse
and Prevention Treatment Block Grant and the Mental Health Services Block Grant; $600 million
for Certified Community Behavioral Health Clinics; and $240 million for emergency grants to
states, among other allocations.
Research and Clinical Trials. The bill provides $1.25 billion to the National Institutes of Health
(NIH), $1.15 billion of which is specifically allocated to research and clinical trials related to the
long-term study of COVID-19.
Coronavirus Relief Fund. Division M, Title X extends the date—from December 30, 2020, to
December 31, 2021—by which state, local, and tribal governments must incur Coronavirus Relief
Fund expenses. Although many recipients may welcome the extension of the original
Coronavirus Aid, Relief, and Economic Security (CARES) Act deadline, this provision may come
too late in the year to address the challenge that some states identified in incurring expenses by
the end of this year. Nor does the bill address states’ pleas for additional funding or for
increased flexibility to use the funds to make up for budget shortfalls and revenue losses (the
authorizing statute specified that funds may be used only to pay for new expenses, those not
accounted for in the most recent budget as of March 27, 2020). In October, the National
Governors Association indicated that nearly 90 percent of Coronavirus Relief Fund payments had
already been allocated. Without additional relief, many states are considering budget-cutting
measures, including health care program cuts. Looking to the new year, additional state relief—
including increased allocations for the Coronavirus Relief Fund and an increase to and extension
of the Medicaid enhanced matching rate that states receive for medical expenditures during the
PHE—are likely to be high priorities for the Biden Administration and Democratic lawmakers.
Provider Relief Fund. Division M adds $3 billion to the Provider Relief Fund—bringing total
funding to $178 billion—and makes targeted changes to the fund, which was initially created by
the CARES Act.
Reporting Guidance. The bill includes a handful of provisions that modify HHS guidance
regarding the reporting obligations Provider Relief Fund payment recipients must meet, and
thereby modify the ways Provider Relief Fund payments may be used by recipients. The bill
maintains the two eligible uses previously established in statute: lost revenues and expenses
attributable to COVID-19. It also retains for HHS the discretion to define the reporting
4requirements that Provider Relief Fund recipients must meet. However, the bill specifies the
following:
• Providers may calculate lost revenues based on the guidance promulgated by HHS in its June
30, 2020 Frequently Asked Questions (FAQs). This provision unwinds guidance HHS issued in
October, which defined lost revenues as the year-over-year change in actual revenues from
patient care. Providers now may use “any reasonable method” of calculating lost revenues,
including comparing year-over-year actual patient care revenues as required by the October
guidance 6 or comparing 2020 budgeted revenues to 2020 actual revenues, as previously
permitted by the June FAQ. (If providers use the latter approach, the budget must have been
“established and approved” prior to March 27, 2020.)
• With respect to Provider Relief Fund payments made to subsidiaries of a parent organization,
the parent organization may transfer funds—including Targeted Distribution payments—
within the “family.” (The Provider Relief Fund is organized into base payments known as
“General Distribution” payments made available to all providers and “Targeted Distribution”
payments made available to providers based on targeted criteria, such as being a hot-spot
hospital; earlier HHS guidance allows for the redistribution of General Distribution, but not
Targeted Distribution, payments.)
Although many providers will be pleased that these changes give them greater flexibility for
using the funds, some providers will be disappointed that Congress did not also require HHS to
reinstate a provision of September-issued reporting guidance that would have allowed providers
with negative operating margins from patient care in 2019 to apply Provider Relief Fund dollars
to lost revenues up to a net zero gain/loss in 2020. (In other words, the since-rescinded HHS
guidance would have allowed providers that were in the “red” in 2019 to apply Provider Relief
Fund dollars to lost revenue up to “break even” in 2020.)
Future Distributions. The bill also specifies that HHS must distribute no less than 85 percent of
the unallocated balance of the Provider Relief Fund and any funds that HHS recovers from health
care providers to eligible health care providers based on their financial losses and changes in
expenses that occurred in the third and fourth calendar-year quarters of 2020, or the first
quarter of 2021. HHS recently announced that it has begun to distribute approximately $24.5
billion in Provider Relief Fund payments via the Phase 3 General Distribution. A significant
portion of Phase 3 payments is based on provider-submitted data related to lost revenues and
expenses—but only for the first half of 2020 (January through June). The inclusion of this
provision:
• Ensures that providers impacted by COVID-19 later in the year (e.g., providers that
experienced a late surge that increased their COVID-19-attributable expenses) will receive a
payment acknowledging any losses and expenses they experienced or are experiencing.
6This guidance was first promulgated on October 22; the updated November 2 version linked here includes a correction to a
drafting error in the October 22 guidance.
5• Likely means that significant future allocations of the Provider Relief Fund will come from the
Biden Administration. From a practical standpoint, HHS will need to solicit refreshed data
from providers (and give providers ample time to submit the data), analyze the data, and
announce allocations—a process that is likely to take longer than the remaining month until
Inauguration Day.
Medicaid Health Care Extenders
Division CC, Title II includes funding through FY 2023 for the following Medicaid programs.
Money Follows the Person Rebalancing Demonstration. Section 204 extends funding for the
Money Follows the Person Rebalancing Demonstration, which helps states rebalance utilization
and spending toward home and community-based services (HCBS) rather than institutional
care. Additionally, it makes minor program adjustments, including a reduction in the
institutional residency period to 60 days (from 90 days), application updates, and new program
reports. The bill provides $450 million per year in funding through FY 2023.
Spousal Impoverishment Protections. Section 205 extends through 2023 the “spousal
impoverishment protections” that allow states to disregard individuals’ spousal income and
assets when determining eligibility for Medicaid HCBS.
Community Mental Health Services Demonstration Program. Section 206 extends the community
mental health services demonstration program, which provides eight participating states with
enhanced funding to improve behavioral health services through Certified Community
Behavioral Health Clinics.
Delay in Medicaid DSH Allotment Reductions and Supplemental Payment
Reporting Requirements
Division CC, Title II delays Medicaid DSH allotment reductions, modifies the way states must
calculate Medicaid shortfall for DSH purposes, and establishes new Medicaid supplemental
payment reporting requirements, including policy modifications that would limit the magnitude
of supplemental payments to hospitals.
Medicaid DSH Allotment Reductions. Section 201 eliminates Medicaid DSH allotment
reductions in FY 2021 and delays the remaining four years of cuts from taking effect until FY
2024.
6Figure 1. Change in Medicaid DSH Allotment Reductions
FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Previous
$8 $8 $8 $8
Reduction $4 billion 7 - -
billion billion billion billion
Amounts
Modified
$8 $8 $8 $8
Reduction - - -
billion billion billion billion
Amounts
Changes to Medicaid Shortfall and Third-Party Payments. Section 203 modifies the maximum
amount of Medicaid DSH payments an individual hospital may receive, by redefining what costs
are included when calculating hospital-specific DSH limits. States’ DSH payments to individual
hospitals may not exceed a hospital’s uncompensated care costs for uninsured patients and
Medicaid patients. The second component—uncompensated care costs for Medicaid patients—
is the difference between costs and payments, and is referred to as the Medicaid shortfall.
HHS guidance and rulemaking regarding how hospitals calculate Medicaid shortfall for DSH
purposes have been contentious and led to a litany of lawsuits. The issue at hand is how to
account for Medicaid enrollees who have another source of coverage, such as Medicare or
commercial insurance, when calculating the hospital-specific DSH payment. Although HHS
policy has been that states must account for all third-party payments when calculating hospital-
specific DSH limits, some hospitals have argued that only Medicaid payments should count
against the hospital-specific DSH limit.
In Section 203, Congress adopts an entirely different method for calculating Medicaid shortfall,
as recommended by the Medicaid and CHIP Payment and Access Commission (MACPAC).
Rather than focus on whether payments for individuals with third-party coverage should count
in the hospital-specific DSH limit calculation, Section 203 simply omits from the calculation
costs for Medicaid-eligible patients with third-party sources of coverage where the third-party
source of coverage is the primary payer. As a result, hospitals that treat high volumes of
patients with Medicaid and third-party coverage (such as children’s hospitals that treat
neonates, which commonly are covered by commercial insurance and Medicaid, or hospitals
serving large numbers of dual eligibles) will report less Medicaid shortfall. And because many
states use hospitals’ uncompensated care amounts to distribute DSH payments among
hospitals, this change is likely to impact the distribution of Medicaid DSH payments among
hospitals in certain states.
7 Beginning in December 2020.
7Supplemental Payment Reporting Requirements. Section 202 imposes new requirements on
states to report on any supplemental payments made through their Medicaid programs. By
October 1, 2021, HHS must establish a system for states to submit reports on supplemental
payment data as a requirement for a State Plan Amendment (SPA) that would provide for a
supplemental payment. In their reports, states will be required to explain, among other
elements, (1) how supplemental payments are in keeping with the Social Security Act’s
mandate that Medicaid payments be consistent with “efficiency, economy, quality of care, and
access,” as well as with the purpose of the supplemental payment; (2) the criteria used to
determine which providers qualify for a supplemental payment; (3) the methodology used to
distribute the supplemental payments; and (4) the amount of supplemental payments made to
each provider.
Importantly, each state’s report must provide an assurance that the total payments made to an
inpatient hospital provider (but excluding DSH payments) do not exceed the upper payment
limit (UPL). There is no hospital-specific cap on supplemental payments subject to the UPL;
rather, the UPL is assessed at an aggregate level for defined classes of providers (which is
established in statute). Section 202 seems to create a new “hospital-specific” UPL, but does not
do so affirmatively. It is unclear whether this was lawmakers’ intent and whether Congress
and/or the Centers for Medicare & Medicaid Services (CMS) may seek to clarify this provision.
Other Medicaid Provisions
Division CC, Title II includes several additional Medicaid provisions of note.
Medicaid Coverage of Non-Emergency Medical Transportation (NEMT). Section 209 amends
the Social Security Act to require that states provide NEMT to Medicaid enrollees (including
those enrolled in benchmark and benchmark equivalent coverage) who lack access to regular
transportation. Previously, the requirement existed only in regulation, and the Trump
Administration had threatened to eliminate it. In, Congress also establishes some guardrails
around the new benefit, namely by including NEMT provider requirements and by directing that
the Medicaid state plan provide for methods and procedures to prevent unnecessary utilization
and to ensure that payments are consistent with efficiency, economy, and quality of care and
sufficient to promote access. The bill directs the Government Accountability Office (GAO) to
study NEMT services, with a particular focus on preventing and detecting fraud and abuse. The
bill requires CMS to report Transformed Medicaid Statistical Information System (T-MSIS) data
to Congress along with recommendations regarding coverage of NEMT to medically necessary
services; to convene a series of stakeholder meetings to discuss best practices for improving
Medicaid program integrity related to NEMT; and to review and update, as necessary, CMS
guidance to states about designing and administering NEMT coverage. Finally, the bill
authorizes states that utilize NEMT brokerage programs, as permitted under Section 1902(a)
(70), to consult stakeholders in establishing their programs.
8Medicaid Fraud Control Unit (MFCU) Authority. Section 207 authorizes MFCUs to investigate
fraud and abuse in non-institutional settings, enhancing protections for enrollees receiving
HCBS.
Medicaid Coverage for Citizens of Freely Associated States. Section 208 eliminates the five-
year bar on Medicaid eligibility for citizens of the freely associated states (i.e., Micronesia,
Marshall Islands, and Palau) who are legally residing in the United States. This change restores
access to Medicaid for this population after a drafting error in the 1996 Personal Responsibility
and Work Opportunity Reconciliation Act (PRWORA) excluded them from coverage. The
provision is effective upon enactment, which will help address a coverage gap that became
even more apparent during the COVID-19 pandemic.
Medicaid Coverage of Clinical Trials. Section 210 provides Medicaid coverage for routine items
and services provided in connection with participation in a qualifying clinical trial;
investigational items and services that are not otherwise covered outside of the clinical trial are
not included (but would presumably be paid as part of the trial). The new requirement, which is
effective on January 1, 2022, applies to traditional state plan coverage as well as to benchmark
coverage.
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